What is the effect of dispersed levels of cognitive ability of members of a (business) team on their team's performance? This paper reports the results of a field experiment in which 573 students in 49 teams start up and manage real companies under identical circumstances. We ensured exogenous variation in - otherwise random - team composition by assigning students to teams based on their measured cognitive abilities (Raven test). Each team performs a variety of tasks, often involving complex decision making. The key result of the experiment is that the performance of business teams first increases and then decreases with ability dispersion. We seek to understand this finding by developing a model in which team members of different ability levels form sub-teams with other team members with similar ability levels to specialize in different productive tasks. Diversity spreads production over different tasks in order to escape diminishing marginal returns under specialization. The model comes with a boundary condition: our experimental finding is most likely to emerge in settings where different tasks exhibit moderate differences in their productive contributions to total output.

One of the most salient and relevant dimensions of team heterogeneity is cultural back-
ground. We measure the impact of cultural diversity on the performance of business
teams using a eld experiment. Companies are set up by teams of undergraduate
students in business studies in realistic though similar circumstances. We vary the
cultural composition of otherwise randomly composed teams in a multi-cultural stu-
dent population. Our data indicate that a moderate level of cultural diversity has no
e ect on team performance in terms of business outcomes (sales, pro ts and pro ts
per share). However, if at least the majority of team members is culturally diverse
then more cultural diversity seems to a ect the performance of teams positively. Our
data suggest that this might be related to the more diverse pool of relevant knowledge
facilitating (mutual) learning within culturally diverse teams.

This paper studies three related questions: To what extent otherwise similar startups employ different quantities and qualities of human capital at the moment of entry? How persistent are initial human capital choices over time? And how does deviating from human capital benchmarks influence firm survival? The analysis is based on a matched employer-employee dataset and covers about 17,500 startups in manufacturing and services. We adopt a new procedure to estimate individual benchmarks for the quantity and quality of initial human resources, acknowledging correlations between hiring decisions, founders human capital,
and the ownership structure of startups (solo entrepreneurs versus entrepreneurial teams). We then study the survival implications of exogenous deviations from these benchmarks, based on spline models for survival data. Our results indicate
that (especially negative) deviations from the benchmark can be substantial, are persistent over time, and hinder the survival of firms. The implications may, however, vary according to the sector and the ownership structure at entry. Given the stickiness of initial choices, wrong human capital decisions at entry turn out to be a close to irreversible matter with significant survival penalties.

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We study possible motivations for co-entrepenurial couples to start up a joint firm, using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010. We compare their pre-entry characteristics, firm
performance and post-dissolution private and financial outcomes with a selected set of comparable firms and couples.
We find evidence that couples often establish a business together because one spouse ? most commonly the female ?
has limited outside opportunities in the labor market. However, the financial benefits for each of the spouses, and
especially the female, are larger in co-entrepreneurial firms, both during the life of the business and post-dissolution.
The start-up of co-entrepreneurial firms seems therefore a sound in-vestment in the human capital of both spouses as
well as in the reduction of income inequality in the household. We find no evidence of non-pecuniary benefits or costs of
co-entrepreneurship

Theory predicts that entrepreneurs have distinct attitudes towards risk and uncertainty,
but empirical evidence is mixed. To better understand the unique behavioral characteristics
of entrepreneurs and the causes of these mixed results, we perform a large ‘lab-in-the-field’ experiment
comparing entrepreneurs to managers – a suitable comparison group – and employees
(n = 2288). The results indicate that entrepreneurs perceive themselves as less risk averse than
managers and employees, in line with common wisdom. However, when using experimental
incentivized measures, the differences are subtler. Entrepreneurs are only found to be unique in
their lower degree of loss aversion, and not in their risk or ambiguity aversion. This combination
of results might be explained by our finding that perceived risk attitude is not only correlated to
risk aversion but also to loss aversion. Overall, we therefore suggest using a broader definition
of risk that captures this unique feature of entrepreneurs; their willingness to risk losses.

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An Application to Residual Income Based Measures like Economic Value Added

Sloof, Randolph; Van Praag, Mirjam(Amsterdam, 2014)

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Resume:

Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical test developed by Courty and Marschke (2008) to detect whether the widely used class of Residual Income based performance measures —such as Economic Value Added (EVA)— is distorted, leading to unintended agent behavior. The paper uses a difference-in-differences approach to account for changes in economic circumstances and the self-selection of firms using EVA. Our findings indicate that EVA is a distorted performance measure that elicits the gaming response.

The underrepresentation of women at the top of hierarchies is often explained by gender
di erences in preferences. We nd support for this claim by analyzing a large dataset from an
online card game community, a stylized yet natural setting characterized by self-selection into
an uncertain, competitive and male-dominated environment. We observe gender di erences
in playing behavior consistent with women being more averse towards risk and competition.
Moreover, we demonstrate how \shying away" makes female players less successful: despite
no gender gap in playing skills, women accumulate lower scores than men due to their relative
avoidance of risky and competitive situations.